The dirty secret of capitalism -- and a new way forward

I am a capitalist,

and after a 30-year career in capitalism

spanning three dozen companies

generating tens of billions
of dollars in market value,

I'm not just in the top one percent,
I'm in the top 0.1 percent of all earners.

Today, I have come to share
the secrets of our success,

because rich capitalists like me
have never been richer.

So the question is, how do we do it?

How do we manage to grab

an ever-increasing share
of the economic pie every year?

Is it that rich people are smarter
than we were 30 years ago?

Is it that we're working harder
than we once did?

Are we taller, better looking?

Sadly, no.

It all comes down to just one thing:

economics.

Because, here's the dirty secret.

There was a time in which
the economics profession

worked in the public interest for everyone

but in the neoliberal era,

today,

they work only for big corporations

and billionaires,

and that is creating
a little bit of a problem.

We could choose to enact economic policies

that raise taxes on the rich,

regulate powerful corporations,
or raise wages for workers.

We have done it before.

But neoliberal economists would warn

that all of these policies
would be a terrible mistake,

because raising taxes
always kills economic growth,

and and any form of government regulation

is inefficient,

and raising wages always kills jobs.

Well, as a consequence of that thinking,

over the last 30 years, in the USA alone,

the top one percent has grown
21 trillion dollars richer

while the bottom 50 percent
have grown 900 billion dollars poorer,

a pattern of widening inequality
that has largely repeated itself

across the world.

And yet, as middle class families
struggle to get by

on wages that have not budged
in about 40 years,

neoliberal economists continue to warn
that the only reasonable response

to the painful dislocations
of austerity and globalization

is even more austerity and globalization.

So, what is a society to do?

Well, it's super-clear to me
what we need to do.

We need a new economics.

So, economics has been described
as the dismal science,

and for good reason, because
as much as it is taught today,

it isn't a science at all, in spite of
all of the dazzling mathematics.

In fact, a growing number
of academics and practitioners

have concluded that neoliberal
economic theory is dangerously wrong

and that today's growing crises
of rising inequality

and growing political instability

are the direct result of decades
of bad economic theory.

What we now know is that the economics
that made me so rich isn't just wrong,

it's backwards,

because it turns out

it isn't capital that creates
economic growth,

it's people;

and it isn't self-interest
that promotes the public good,

it's reciprocity;

and it isn't competition
that produces our prosperity,

it's cooperation.

What we can now see is that an economics
that is neither just nor inclusive

can never sustain the high levels
of social cooperation

necessary to enable
a modern society to thrive.

So where did we go wrong?

Well, it turns out
that it's become painfully obvious

that the fundamental assumptions
that undergird neoliberal economic theory

are just objectively false,

and so today first I want to take you
through some of those mistaken assumptions

and then after describe where the science
suggests prosperity actually comes from.

So neoliberal assumption number one is

that the market is an efficient
equilibrium system,

which basically means that if one thing
in the economy, like wages, goes up,

another thing in the economy,
like jobs, must go down.

So for example, in Seattle, where I live,

when in 2014 we passed our nation's
first 15 dollar minimum wage,

the neoliberals freaked out
over their precious equilibrium.

"If you raise the price
of labor," they warned,

"business will purchase less of it.

Thousands of low-wage workers
will lose their jobs.

The restaurants will close."

Except, they didn't.

The unemployment rate fell dramatically.

The restaurant business in Seattle boomed.

Why?

Because there is no equilibrium.

Because raising wages
doesn't kill jobs, it creates them,

because, for instance,

when restaurant owners are suddenly
required to pay restaurant workers enough

so that now even they can afford
to eat in restaurants,

it doesn't shrink the restaurant business,

it grows it, obviously.

(Applause)

Thank you.

The second assumption is

that the price of something
is always equal to its value,

which basically means that
if you earn 50,000 dollars a year

and I earn 50 million dollars a year,

that's because I produce
a thousand times as much value as you.

Now, it will not surprise you to learn

that this is a very comforting assumption

if you're a CEO paying yourself
50 million dollars a year

but paying your workers poverty wages.

But please, take it from somebody
who has run dozens of businesses:

this is nonsense.

People are not paid what they are worth.

They are paid what they have
the power to negotiate,

and wages' falling share of GDP

is not because workers
have become less productive

but because employers
have become more powerful.

(Applause)

And by pretending that the giant imbalance
in power between capital and labor

doesn't exist,

neoliberal economic theory
became essentially

a protection racket for the rich.

The third assumption,
and by far the most pernicious,

is a behavioral model

that describes human beings
as something called "homo economicus,"

which basically means that
we are all perfectly selfish,

perfectly rational,
and relentlessly self-maximizing.

But just ask yourself,

is it plausible that every single time
for your entire life,

when you did something
nice for somebody else,

all you were doing was maximizing
your own utility?

Is it plausible that when a soldier jumps
on a grenade to defend fellow soldiers,

they're just promoting
their narrow self-interest?

If you think that's nuts,

contrary to any reasonable
moral intuition,

that's because it is,

and according to the latest science,

not true.

But it is this behavioral model

which is at the cold, cruel heart
of neoliberal economics,

and it is as morally corrosive

as it is scientifically wrong,

because if we accept at face value

that humans are fundamentally selfish

and then we look around the world

at all of the unambiguous
prosperity in it,

then it follows logically,

then it must be true by definition,

that billions of individual
acts of selfishness

magically transubstantiate
into prosperity and the common good.

If we humans are merely
selfish maximizers,

then selfishness is the cause
of our prosperity.

Under this economic logic,

greed is good,

widening inequality is efficient,

and the only purpose of the corporation

can be to enrich shareholders,

because to do otherwise would be
to slow economic growth

and harm the economy overall.

And it is this gospel of selfishness

which forms the ideological cornerstone
of neoliberal economics,

a way of thinking which has
produced economic policies

which have enabled me and my rich buddies
in the top one percent

to grab virtually all of the benefits
of growth over the last 40 years.

But, if instead

we accept the latest empirical research,

real science, which correctly
describes human beings

as highly cooperative,

reciprocal,

and intuitively moral creatures,

then it follows logically

that it must be cooperation

and not selfishness

that is the cause of our prosperity,
and it isn't our self-interest

but rather our inherent reciprocity

that is humanity's economic superpower.

So at the heart of this new economics

is a story about ourselves that grants us
permission to be our best selves,

and, unlike the old economics,

this is a story that is virtuous

and also has the virtue of being true.

Now, I want to emphasize
that this new economics

is not something I have personally
imagined or invented.

Its theories and models
are being developed and refined

in universities around the world

building on some of the best
new research in economics,

complexity theory, evolutionary theory,

psychology, anthropology,
and other disciplines.

And although this new economics
does not yet have its own textbook

or even a commonly agreed upon name,

in broad strokes

its explanation of where prosperity
comes from goes something like this.